Thursday, October 1, 2009
Bear and Gold Rant
Things you'll rarely hear from me these days: a bearish disposition on stocks and a pro-Gold investment standpoint...
Here's a 3 year log scale daily linear chart of the NASDAQ ($COMPQ) in all it's bearish glory:
And for all you Gold bulls and haters out there, here's a 10 year log scale ratio chart of the Gold Bugs' unhedged Gold mining index ($HUI or "Huey" for those really into it) divided by the S&P 500. This shows how much Gold stocks have kicked the S&P 500's ass over the past decade and how they will continue to do so:
I've said it before and I'll say it again: the S&P 500 is going to new lower lows below the March 2009 lows. Major Gold stock indices (e.g., XAU, HUI, GDX) will not be making new lows and are in a major new cyclical bull market that began in the fall of 2008.
I get deja vu whenever I look at the HUI:S&P 500 ratio chart. You know why? 'Cuz it looks like the chart of one of my favorite Gold stock plays: Royal Gold (ticker: RGLD). Here's a 10 year log scale linear chart of RGLD:
Physical Gold held outside the financial system is a safe play for your savings until the Dow to Gold ratio gets to 2 (and we'll probably go below 1 this cycle) and general stocks are a terrible investment until this time. The major stock market indices are going to make new lows, likely in less than a year. Gold stocks will struggle during the nastiest part of the stock market declines but will make a net gain while the stock market makes a major net loss. Once the stock market cyclical bear market bottoms, the Gold sector will catch fire and the Gold stock bull market will create life-changing gains for those who can hang on and ride it to bubblicious highs.